Tips for Getting Paid On Time

getting-paid-on-time

Keeping your business cash flow strong can be a constant battle. Unpaid invoices can really cause problems if left too long. Here are some tips for getting paid on time:


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Good accounting system and routines

Do you actively manage your business cash flow or does the lack of cash govern the way you manage your business? A tighter credit control system can help a business to identify potential bad debts and take appropriate steps to reduce them, and ultimately get paid on time.

Credit control system

Your credit control system should be:

  • Flexible
  • Reliable
  • Secure
  • Adaptable
  • Economical

Recommended reading: How Cash Flow Determines Startup Success

Managing cash flow actively

Getting paid on time requires a business to actively manage cash flow and to have a good credit control system. A good credit control system should allow you to identify invoices that have been raised, sent to customers or paid. You must also be able to see which invoices need chasing up at any time.

Getting paid on time is about managing three areas:

1. Set up of your cash management:

  • Decide which customers will receive credit – credit is not an automatic entitlement.
  • Credit-check potential new customers and agree Terms of Service.
  • Set a credit limit for each customer – new and existing where possible.
  • Use fully documented Terms of Service  – Put them in place for existing customers if not already done so.
  • Ensure your Terms of Service specify Credit Terms if being provided.
  • Provide a quote in advance of doing any work and ensure your system can convert a quote to invoice easily.
  • Ask for a deposit or part payment in advance, especially for new customers where there is a substantial amount of work to be undertaken from the outset.
  • Consider including a provision to allow you to charge interest on Late Payment.
  • Have procedures to deal with disputes.
  • Specify the most appropriate payment method: cheque/electronic payment/credit. Include your bank account details for electronic payment on the invoice.
  • Agree the payment terms in writing and include them on each invoice

2. Prompt Billing and Follow Up:

  1. Send invoices promptly.
  2. Email rather than post invoices.
  3. Follow up invoices before their due date and check:
  • Has the customer received the invoice?
  • Are there any disputes, queries or issues.
  • Confirm when is the invoice scheduled to be paid

How will payment be made:

  • Start an automatic reminder procedure to flag invoices that are due.
  • Ensure you have a system that can easily report on aged debtors and email them with ease.
  • Send out statements or better still phone, to chase up payment.

3. Have a Collection Process:

Set a Collection Policy for your business

  • Where clients are in breach of credit terms, consider a stop list.
  • Circulate this list to all appropriate employees.
  • Inform the client that they are on the list.
  • Chase overdue payments within a week of them being due.
  • Conduct an aged debt analysis each week. Ensure this report can be set up on the system and is easy to use.
  • Prioritise your collection activity and chase the highest values first.
  • Levy a charge for “bounced cheques/direct debits”.
  • Use a set policy for further chasing, for example, standard letters, emails, calls, and faxes, visits referring to Solicitors or a Debt Collection Agency.

Routine, routine and routine

Invoice promptly and regularly! Communicate the payment terms from the outset. Agree fees/costs in advance where possible. Discuss the billing and payment process in advance with customers. Operate your cash managements system in a firm, but intentional manner. Getting paid on time is about routine.

If you execute a system as part of your business routine getting paid on time will happen!

Written by Mark Hegarty

 

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